{"title":"Identifying Cryptocurrencies as Diversifying Assets and Safe Haven in the Indian Stock Market","authors":"Susovon Jana, Tarak Nath Sahu","doi":"10.1007/s10690-023-09436-5","DOIUrl":null,"url":null,"abstract":"<div><p>This study investigates the interconnectedness between cryptocurrency and the Indian stock market and explores the diversification, hedge, and safe haven potential of cryptocurrency. The study employs the wavelet approach on daily data from October 6, 2017, to October 5, 2022, to execute the empirical analysis. The findings confirm that, in a healthy economic environment, cryptocurrencies are not connected with the Indian stock market. However, during times of financial turmoil, Bitcoin, Ethereum, and Cardano are positively correlated with the stock market. Additionally, the study identifies Bitcoin, Ethereum, Dogecoin, and Cardano as competent in providing diversification, or hedge opportunities in normal economic situations. But during periods of financial stress, only Dogecoin may act as a safe haven asset. This is the first study to explore the time-varying correlations and causal dependencies between the stock and cryptocurrency markets in India using the wavelet approach. It extends the literature in finance by examining both normal and economic turmoil periods, providing insights for portfolio managers, policymakers, and investors on how to manage their portfolios during these periods.</p></div>","PeriodicalId":54095,"journal":{"name":"Asia-Pacific Financial Markets","volume":"31 4","pages":"925 - 944"},"PeriodicalIF":2.5000,"publicationDate":"2023-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Asia-Pacific Financial Markets","FirstCategoryId":"1085","ListUrlMain":"https://link.springer.com/article/10.1007/s10690-023-09436-5","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This study investigates the interconnectedness between cryptocurrency and the Indian stock market and explores the diversification, hedge, and safe haven potential of cryptocurrency. The study employs the wavelet approach on daily data from October 6, 2017, to October 5, 2022, to execute the empirical analysis. The findings confirm that, in a healthy economic environment, cryptocurrencies are not connected with the Indian stock market. However, during times of financial turmoil, Bitcoin, Ethereum, and Cardano are positively correlated with the stock market. Additionally, the study identifies Bitcoin, Ethereum, Dogecoin, and Cardano as competent in providing diversification, or hedge opportunities in normal economic situations. But during periods of financial stress, only Dogecoin may act as a safe haven asset. This is the first study to explore the time-varying correlations and causal dependencies between the stock and cryptocurrency markets in India using the wavelet approach. It extends the literature in finance by examining both normal and economic turmoil periods, providing insights for portfolio managers, policymakers, and investors on how to manage their portfolios during these periods.
期刊介绍：
The current remarkable growth in the Asia-Pacific financial markets is certain to continue. These markets are expected to play a further important role in the world capital markets for investment and risk management. In accordance with this development, Asia-Pacific Financial Markets (formerly Financial Engineering and the Japanese Markets), the official journal of the Japanese Association of Financial Econometrics and Engineering (JAFEE), is expected to provide an international forum for researchers and practitioners in academia, industry, and government, who engage in empirical and/or theoretical research into the financial markets. We invite submission of quality papers on all aspects of finance and financial engineering.
Here we interpret the term ''financial engineering'' broadly enough to cover such topics as financial time series, portfolio analysis, global asset allocation, trading strategy for investment, optimization methods, macro monetary economic analysis and pricing models for various financial assets including derivatives We stress that purely theoretical papers, as well as empirical studies that use Asia-Pacific market data, are welcome.
Officially cited as: Asia-Pac Financ Markets
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